CEM REPORT, FINANCE | The Central Bank of Nigeria (CBN) has restricted financial institutions applying for licence recategorisation or conversion from taking certain decision and engaging in certain activities during the time of the application.
The general guidelines on processes; requirements and qualifications issue by the CBN is directed to commercial, microfinance, primary mortgage banks, merchant, non-interest, and payment service banks.
The regulatory guide signed by the Director of the Financial Policy and Regulation Department, Chibuzo Efobi, prohibits operators approaching the CBN for a change of the line of business from expanding or reducing their current banking network, rolling out new products or executing new strategic banking activity, while the application is being processed.
The applicants are also prohibited from taking any new business decision after the conversion process has commenced “except in line with the bank’s conversion strategy submitted to the CBN”.
The apex bank guideline also stated that: “Any bank or OFI seeking to change its licence type shall communicate its desire in writing to the Director of its current supervisory department. The application shall be accompanied by a business plan duly approved by the financial institution’s shareholders at an Annual General Meeting or Extra Ordinary General Meeting and the Board of Directors. It shall contain detailed processes, procedures, timelines and milestones regarding the proposed change.”
Applications are to be supported with documents showing the following: board resolution, the rationale for the change, business case, vision/mission/strategy, governance structure, evidence of Shariah Compliance (where applicable) and risk management framework. Other subject matters to be covered are financial projection and CBN approvals for any change(s) in management/board/shareholding since the issuance of the extant licence.”
Additional, an applicant for a change of licence, irrespective of the category, is required to show proof of IT infrastructure as a necessary requirement for considering an entry.
Also before granting final approval the document states that “the CBN shall conduct an inspection of the premises and facilities to ascertain their suitability or otherwise and confirm the authenticity of all relevant documents submitted by the bank or OFI (where applicable).
The apex bank also directed organisation who successfully get there application approved shall inform the relevant supervisory department of the CBN of its readiness to commence operations.
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“A bank or OFI that converted to another licence type shall, through a letter, inform the relevant supervisory department of the CBN of its readiness to commence operations and such information shall be accompanied by one copy each of the following: opening statement of affairs signed by external auditors and at least two directors with their names and designation and minutes of a pre-commencement board meeting.”
Among other criteria, applicants are expected to meet the capitalisation of their target categories and show readiness to comply with the codes of conduct practice.